In a transfer of a controlling interest, must the transferee execute the then-current Annex Brands franchise agreement?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
If the transfer is of a controlling interest in Franchisee, or is one of a series of transfers that in the aggregate constitute the transfer of a controlling interest in Franchisee, all of the following conditions must be met prior to, or concurrently with, the effective date of the transfer:
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- The transferee, including all its officers, directors or partners will jointly and severally execute the then-current franchise agreement and other standard ancillary agreements thereby agreeing to be bound by all the terms and conditions of those agreement(s) (except that no additional initial franchise fee will be charged).
A transfer has the effect of superseding the previous franchise agreement, when a new franchise agreement is entered into with the transferee.
Source: Item 22 — Contracts (FDD pages 109–110)
What This Means (2025 FDD)
According to Annex Brands' 2025 Franchise Disclosure Document, if a transfer involves a controlling interest in the franchise, the transferee is required to execute the then-current franchise agreement. This means the new owner must agree to be bound by all the terms and conditions of the existing agreement, along with any other standard ancillary agreements. A key point is that no additional initial franchise fee will be charged in this scenario. This requirement ensures that Annex Brands maintains consistent standards and practices across all its franchise locations, even when ownership changes.
This condition is part of a broader set of requirements that must be met for Annex Brands to approve the transfer of a controlling interest. These requirements are in place to protect the integrity of the Annex Brands system and ensure that new owners are qualified and committed to upholding brand standards. The FDD specifies that the proposed transferee must meet Annex Brands' then-applicable standards for franchisees and be of good moral character.
Furthermore, the FDD states that when a new franchise agreement is entered into with the transferee, the previous franchise agreement is superseded. This has implications for the Protected Area granted to the franchisee, as the new Protected Area may be smaller than the original one. Franchisees are explicitly instructed not to represent to potential transferees that they will be granted the original Protected Area. This change in the Protected Area, along with potential changes to fees, payment, operational, and reporting requirements, highlights the importance of carefully reviewing the new franchise agreement during a transfer.
In summary, if you are considering purchasing an Annex Brands franchise through a transfer of controlling interest, be prepared to sign the then-current franchise agreement. Understand that this agreement may differ from the original one, particularly regarding the Protected Area and other operational requirements. Consult with Annex Brands directly to fully understand the terms and conditions of the new agreement and how they may impact your investment.